N.K.KAPOOR,J. - (1.) THE petitioner has filed this petition under s. 256(2) of IT Act, seeking a direction to the Tribunal to refer the following question of law along with statement of the case for adjudication to this Court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition of Rs. 1,32,168 being the income shown in the name of M/s Dipan Kumar and Co. but assessed in assessee's hands as benami of the assessee-company that M/s Dipan Kumar and Co. was a separate entity ignoring the fact that though it had a sales-tax number but it had no bank account of its own. Rather it used assessee's bank account and also no expenditure whatsoever was incurred towards rent, salary, etc., in the running of day-to-day business activities?" Income Tax Case No. 88 of 1993
(2.) FACTS as noticed by the Tribunal are as under : The assessee-company, the respondent, was carrying on business of manufacture of steel ingots and alloy steels. The firm submitted a return, offering a taxable income of Rs. 35,43,180. The IAC (Asst.) during the course of examination of books of account noticed that the assessee had received 39.18 tons of scrap from M/s V. Traders, Delhi for the purpose of converting into steel and the conversion charges totalling Rs. 2,12,813 had been charged to the account of M/s Dipan Kumar and Company, Damtal, which was stated to be an HUF concern of the Managing Director Shri Dipan Kumar. It was also noticed according to IAC (Asst.) that the raw material had been directly received in the factory premises of the company and after its conversion was despatched to M/s Pathankot Steels Alloys (P) Ltd., Damtal. It was also mentioned that the assessee-company had independent business of dealing with M/s Pathankot Steels Alloys (P) Ltd., Damtal. It is during the scrutiny of profit and loss account of M/s Dipan Kumar and Company, Damtal, that it was known that this company incurred no expenditure on rent, salary, etc., and this firm too had its office located in the premises of M/s Pathankot Steels Alloyes (P) Ltd., Damtal. Thus, on the basis of examination of the books of account it formed an opinion that M/s Dipan Kumar and Company had no independent existence and was, in fact, carrying on the business for the assessee-company. While giving the above finding against the assessee, the IAC (Asst.) rejected the contention that M/s Dipan Kumar and Co. had an independent identity. It is this finding which was assailed by the assessee before the Tribunal. Tribunal after going through the material placed on record as well as a perusal of the impugned orders of the authorities below, came to the conclusion that conclusion arrived at by the authorities was contrary to facts on record. Examining the contentions raised by the parties in the light of material on record, Tribunal came to the conclusion that the assessee was not to gain anything by claiming that M/s Dipan Kumar and Co. , an HUF concern, had earned profit of Rs. 1,32,165 and also had a credit balance of Rs. 9,77,363 and had this been a case of benami transaction then the easy course would have been to pay interest on the credit balance and which figure would have been in the vicinity of profit of Rs. 1,32,165. Tribunal also examined the accounts of M/s Dipan Kumar and Co. in this regard. Accordingly Tribunal came to the conclusion that neither the assessee gained anything by way of reducing tax liability nor M/s Dipan Kumar and Co., an HUF concern, benefited anything in any manner. This being the position, no legal controversy remained to be resolved. It was, thus, held that M/s Dipan Kumar and Co. is separate entity and the profit earned by it could not be taxed in the hands of the appellant.
(3.) THE learned counsel for the petitioners assailed the conclusion arrived at by the Tribunal and in support of his arguments, has made reference to the order passed by the IAC(Asst.) and CIT(A). Almost identical points have been pressed which somehow did not find favour with the Tribunal that is to say that M/s Dipan Kumar and Co. was, in fact, a benami concern for the reason that it had no independent office. It is not paying any rent for any premise of its occupation nor there was proof that any salary was being paid to its employees. Since the Tribunal had not examined the matter in its right prospective and contrary to the statutory provisions, a question of law arises in the facts as noticed by the authorities and this way the direction is called for by the Court to the Tribunal to frame question of law as proposed or in a modified form for reference. The learned counsel for the respondent contested the assertions of the petitioner on facts as well as law. According to the respondent's counsel, the basis of reference under s. 256(2) of the Act is the decision of the Tribunal. In the instant case, the Tribunal has minutely examined the contentions raised by the assessee as well as the Department in detail and on perusal of the accounts of the assessee-firm as well as of M/s Dipan Kumar and Co., it came to the conclusion that conclusion arrived at by the authorities below was unsustainable in law. On facts it was found that neither the assessee nor M/s Dipan Kumar and Co. was to gain by such an arrangement. Not only this, counsel highlighted that parties before the Tribunal, in fact, accepted that no legal controversy is involved in the present case which entirely depends on appreciation of facts alone. Accordingly, it was urged that since no question of law arises, the present petition is liable to be dismissed.;